Chicago-based IHT Wealth Management is buying a $700 million advisory firm in Massachusetts in the first of several deals it's negotiating as more advisory firms seek to team up with each other to be more competitive.
IHT Wealth Management is buying Braintree, Mass.-based U.S. Wealth Management over five years, with the amount of the payments to be determined annually based on the valuation of the company, said Steven Dudash, founder and president of IHT.
While this is the first time IHT is buying another advisory group, it has several similar transactions in the works where the owners of hybrid firms are selling their firms as they look towards retirement, Mr. Dudash said.
Some advisory firms face pressure from having to adjust their business models to meet the demands of the Labor Department's fiduciary rule on retirement advice, as well as other industry challenges that make it easier for larger firms to operate efficiently and compete for clients.
“Firms are getting squeezed out because of the DOL rule,” he said. “Size matters in our industry and firms need to be able to gain efficiencies of scale.”
(More: Investment Company Institute says DOL rule is already depriving investors of financial advice)
Within the last year, eight individual advisers sold their businesses to IHT because the founders decided to retire either immediately or in the next couple of years, Mr. Dudash said.
The DOL's fiduciary rule for retirement advice will begin to be implemented on April 10, 2017.
U.S. Wealth Management's 30 advisers will join IHT's 28 advisers to create a firm of about $2 billion in assets under management, Mr. Dudash said. Both firms are dually registered as RIAs and broker-dealers offering securities through LPL Financial.
U.S. Wealth Management CEO John Napolitano will continue to be an adviser at the firm even after the sale is completed in about five years.
"Looking further down the road, I could not have found a better successor to take the reins at U.S. Wealth Management when the time comes than Steven Dudash,” Mr. Napolitano said. “Steve is 20 years younger than I am, and has built a team that demonstrates a unique gift for understanding the specific needs of each adviser and developing solutions to help them thrive.”
Mr. Napolitano, 59, founded U.S. Wealth Management in 1992 under a different name. He has been a leader in the financial advice industry, including a stint as president of the Financial Planning Association of Massachusetts and author of a weekly syndicated column, “Making Cents.”
